Rate differential trades are a tough business because things can get way out of line before they correct.
In any case, according to BNP Paribas’ proprietary models EUR/USD should be trading around 1.3200 and that the pair is the most overvalued since early June.
The suggest selling at 1.3510 with a target of 1.2800 and a stop at 1.3730.
Citi is on the other side of the trade (and so am I).
